This document provides a comprehensive overview of the tribunal proceedings and decisions regarding the appeal filed by Karcher Cleaning Systems Pvt. Ltd. against the assessment order for the Assessment Year 2014-15. The appeal was heard by the Income Tax Appellate Tribunal, Delhi Bench ‘I’.
Karcher Cleaning Systems Pvt. Ltd., engaged in importing and distributing industrial cleaning equipment in India, contested adjustments made by the Transfer Pricing Officer (TPO) and subsequent assessment by the Addl. CIT, Special Range-5. The primary contention revolved around the inappropriate application of the Transfer Pricing methodology and the selection of comparables.
The company challenged the assessment on several grounds, arguing that the Resale Price Method (RPM) should have been adopted considering its business model as a distributor without significant value addition to the imported products. The appeal highlighted various procedural and substantive errors in the assessment, including the rejection of submitted segmental accounts and comparability adjustments.
The Tribunal, after considering the submissions and precedents, directed a re-evaluation of the transfer pricing methodology, acknowledging the company’s role as a distributor. The case was remanded back to the TPO for a detailed analysis and proper application of the RPM, emphasizing consistency with earlier tribunal decisions favoring the appellant in similar circumstances.
The Tribunal’s decision to remand the case highlights the importance of accurate method selection in transfer pricing cases and reinforces the need for tax authorities to consider the specific business functions and risks while making adjustments. This case serves as a significant reference for similar disputes in the realm of transfer pricing within the distribution sector.
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